Important Business Formation Documents

Business Continuation Strategy

Continuations strategies are a much-overlooked aspect that business owners must think about, especially if there is more than one principal owner of the business. Continuation strategies prepare for the unexpected personal circumstances that can seriously affect the business. This could include serious injury, illness, death or departure of a major partner in the company.

By having a continuation strategy in place, it will clearly outline what guidelines are to be followed both financially and operationally with the company. If a principal dies or leaves the business, it will outline whether the affected party’s share in the company would transfer to another member, the ownership team or to another person outside of the corporate structure. This agreement should also outline how the duties of the departed principal would be redistributed within the operational activities of the company.

This agreement between the ownership team gives the partners peace of mind that there is something in place to protect the owners financially in case the worst happens. Clearly documenting this information could help mitigate severe consequences.

Buy-Sell Agreement

A buy-sell arrangement is an important contract that much be signed by co-owners of a business that governs what happens if an owner dies or is otherwise forced to leave the company. This agreement would also document how proceedings would occur if an owner chooses to leave the business voluntarily. In most cases a buy-sell arrangement is backed by a life insurance policy covering all major principals of an organization.

Buy-Sell Arrangements are a vital document within business development and should cover all situations that can occur, for assistance with these documents a professional business consultant should review the arrangements that you have made.